YOUR COMPANY IS LOOKING FOR BUSINESS FINANCE SOLUTIONS!
Asset Based Lending - Working Capital That Grows With You
You've arrived at the right address! Welcome to 7 Park Avenue Financial
Financing & Cash flow are the biggest issues facing business today
ARE YOU UNAWARE OR DISSATISFIED WITH YOUR CURRENT BUSINESS FINANCING OPTIONS?
CONTACT US - OUR EXPERTISE = YOUR RESULTS!!
7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Oakville, Ontario
L6J 7J8
Direct Line = 416 319 5769
Email = sprokop@7parkavenuefinancial.com
"The art of Asset Based Lending is not just about lending against assets, but understanding how those assets drive business success." - Author Unknown.
Asset-Based Lending Loan: A Game-Changer for Canadian Businesses
Table of Contents
What Is Asset-Based Lending?
Breaking Free from Cash Flow Constraints
Uncommon Insights on ABL Financing
Key Industry Data Points
How Asset-Based Lending Works
The Rise of Asset-Based Credit Lines
Funding Timelines and Speed
Eligible Collateral in ABL
Qualification Requirements
Timing in Asset-Based Finance
Bank Loans vs. Asset-Based Lending
Equity Financing vs. ABL
Understanding Collateral in ABL
Typical Collateral Structures
Key Takeaways
Conclusion
FAQs
What Is Asset-Based Lending?
Asset-based lending (ABL) is a financing structure where loans are secured by business assets.
These typically include accounts receivable, inventory, equipment, or real estate.
ABL is primarily used by businesses—not consumers—for growth and working capital.
It is especially relevant for small and mid-sized enterprises (SMEs) with limited credit history.
Why Your Bank's Answer Isn't the Last Word on Your Financing
PROBLEM:
Your business has real assets — receivables, inventory, equipment — and yet you can't get the working capital you actually need from a traditional bank.
Every month you underfund payroll, miss a supplier discount, or lose a contract you could have won — because the capital is locked inside your balance sheet.
SOLUTION:
An asset based lending loan converts what you already own — receivables, inventory, equipment — into a working capital facility sized to your actual asset base, not a banker's comfort level.
Three Uncommon Takes on ABL
1. ABL Can Be Cheaper Than Equity
Asset-based lending is often compared to bank loans—but the better comparison is equity.
Equity financing dilutes ownership permanently, while ABL is temporary and repayable.
Over time, avoiding dilution can make ABL significantly more cost-effective.
2. ABL Lenders Offer Deeper Industry Expertise
ABL lenders typically specialize in specific sectors like manufacturing or distribution.
They understand receivables cycles, inventory liquidity, and real collateral risk.
This often leads to higher advance rates and more tailored financing structures.
3. ABL Can Replace Traditional Bank Financing
ABL is not just a supplemental facility—it can fully replace a bank operating line.
It often provides greater borrowing capacity and fewer restrictive covenants.
In some cases, ABL structures also eliminate personal guarantee requirements.
Breaking Free from Cash Flow Constraints
Cash flow gaps can restrict even profitable companies.
They limit payroll capacity and delay growth opportunities.
Traditional lenders often prioritize credit scores and ratios.
They may undervalue strong underlying assets.
Asset-based lending solves this by unlocking asset value.
It provides flexible funding aligned with operating cycles.
Uncommon Insights on ABL Financing
Improves operational discipline through tighter receivables tracking
Encourages stronger inventory management systems
Stabilizes seasonal cash flow fluctuations
Aligns borrowing with real-time business performance
Key Industry Data Points
65% of ABL users report improved cash flow
Typical facility size ranges from $2M to $50M
Market growth: ~40% year-over-year
80% of borrowers renew their facilities
Default rates are generally below 2%
How Asset-Based Lending Works
ABL facilities are structured around a borrowing base.
This base is calculated from eligible collateral.
Typical advance rates include:
Accounts receivable: 70–85%
Inventory: 50–65%
Equipment: 50–75%
Loan size depends on asset quality and liquidity.
Higher-quality assets yield higher advance rates.
The Rise of Asset-Based Credit Lines
ABL has expanded significantly across North America.
Its origins date back to early 20th-century U.S. markets.
Today, it is widely used in Canada.
Growth is driven by demand for flexible capital solutions.
How Quickly Can You Access Funding?
Q: How fast is ABL funding?
Initial funding: 3–4 weeks
Ongoing advances: 24–48 hours
Credit line increases: 5–7 business days
What Assets Qualify as Collateral?
Q: What can be used as collateral in ABL?
Accounts receivable
Inventory
Equipment and machinery
Real estate (in some cases)
Collateral quality directly impacts borrowing capacity.
What Are the Minimum Requirements?
Who qualifies for asset-based lending?
$2M–$3M+ in annual revenue
Strong asset base
Reliable bookkeeping systems
No strict minimum credit score
Timing Is Everything in Asset-Based Finance
ABL is highly timing-sensitive.
It provides capital when traditional lenders hesitate.
This is common during rapid growth or industry volatility.
Access to liquidity at the right time is critical.
Bank Loans vs. Asset-Based Lending
How Traditional Bank Loans Work
Banks focus on:
Profitability
Cash flow consistency / cash flow lending
Financial ratios and covenants for a loan transaction
This can limit access during transitional periods.
The Advantage of Asset-Based Lending Financing Solution
ABL focuses on pledged asset / asset value—not just earnings.
It enables continuous borrowing as assets turn over.
More flexible structures
Higher borrowing potential
Scalable with growth
Why Equity Financing Isn’t Always the Solution
Equity financing dilutes ownership.
Many business owners prefer to retain control.
For SMEs, raising equity can be impractical.
ABL offers a non-dilutive alternative.
Understanding Collateral in Asset-Based Lending
Assets vs. Collateral
Assets are recorded on the balance sheet.
Collateral reflects what lenders can liquidate.
ABL lenders focus on realizable value.
This determines actual borrowing capacity.
Key Structural Advantages
Covenant-light structures
Ongoing borrowing base adjustments
Refinancing flexibility
Typical Collateral in ABL
Accounts receivable (A/R)
Inventory
Equipment and machinery
Commercial real estate
Assets must typically be free of liens.
Case Study — Asset-Based Lending Loan
Overview
ABC Company, an Ontario-based manufacturer with $8.2M in revenue, was growing rapidly but constrained by a limited bank line.
Despite strong receivables ($2.1M) and inventory ($1.4M), the bank underutilized these assets.
Challenge
$1.2M bank line consistently maxed out
Only 50% advance on receivables; no inventory financing
Personal guarantee required
Growth stalled due to lack of working capital
Solution
A specialized asset-based lending (ABL) facility was implemented:
$1.8M line on receivables (80% advance)
$600K inventory financing (45% advance)
$400K equipment loan
No personal guarantee
Total facility: $2.8M
Results
+133% increase in available credit ($1.2M → $2.8M)
Secured 2 new contracts within 60 days
+18% projected revenue growth
No financial covenants (borrowing base structure)
Funding completed in 19 business days
Key Takeaways on the Case Study
ABL unlocks trapped liquidity in receivables and inventory
Higher advance rates significantly increase borrowing capacity
Eliminates growth constraints caused by traditional bank limits
Faster funding supports immediate expansion opportunities
Ideal for asset-rich, high-growth companies
Key Takeaways - Asset Based Lending
ABL converts assets into immediate working capital
Borrowing capacity scales with business growth
Faster access to funds vs. traditional loans
Less reliance on credit scores
Ideal for growth, restructuring, or acquisitions
Conclusion
Asset-based lending provides a practical solution for businesses needing flexible capital.
It enables companies to leverage existing assets instead of relying solely on cash flow.
For Canadian businesses navigating growth or transition, ABL offers speed, scalability, and control.
Call 7 Park Avenue Financial, a trusted, credible and experienced Canadian business financing advisor who can help you structure flexible financial solutions.
FAQ/FREQUENTLY ASKED QUESTIONS
What is an asset-based lending loan?
An asset-based lending (ABL) loan is a credit facility secured by business assets.
Borrowing capacity is based on receivables, inventory, or equipment—not credit score.
It typically operates as a revolving line or term loan.
Who qualifies for an asset-based lending loan in Canada?
Businesses qualify based on asset strength rather than profitability.
Common criteria include:
$500K+ annual revenue
Strong receivables, inventory, or equipment
Industries like manufacturing, distribution, and transportation
Companies declined by banks or in turnaround situations
How does ABL differ from a bank line of credit?
Borrowing base: ABL is asset-driven; banks rely on financials
Covenants: ABL has fewer restrictions
Advance rates: ABL offers higher borrowing availability
What are typical ABL advance rates?
Receivables: 70–85%
Inventory: 30–60%
Equipment: 75–85%
Real estate: 65–75%
Rates vary based on asset quality and liquidity.
How much does an ABL loan cost in Canada?
ABL pricing includes interest, unused line fees, and monitoring costs.
Total costs typically range from 8% to 18% annually.
Smaller facilities usually have higher relative costs.
When should a company consider ABL?
When assets are undervalued by banks
During rapid growth or tight cash flow
After being declined for traditional financing
When higher credit limits are required
How does asset-based lending improve cash flow?
Provides immediate working capital
Enables flexible drawdowns
Scales with revenue growth
Reduces seasonal gaps
Accelerates receivables conversion
What advantages does ABL offer over traditional loans?
Less emphasis on credit scores
Higher advance rates
Flexible structures
Faster approvals
Growth-focused lending
How does ABL support business expansion?
Funds equipment purchases
Supports inventory growth
Enables hiring
Facilitates acquisitions
Expands into new markets
What documentation is required?
Financial statements
A/R aging reports
Inventory reports
Equipment appraisals
Tax returns
How long does approval take?
Initial review: 2–3 days
Due diligence: 1–2 weeks
Documentation: 1 week
Final approval: 3–5 days
Total: ~3–4 weeks
What determines the borrowing base?
Asset quality
Advance rates
Historical performance
Industry risk
Seasonality
How do unsecured loans compare to ABL?
No collateral required (unsecured loans)
Higher interest rates
Stronger reliance on credit
ABL offers lower risk pricing
ABL uses tangible assets
Statistics — Asset Based Lending Loan
Canadian SME Financing Gap
CFIB research indicates that 25-30% of Canadian SMEs report access to financing as a significant obstacle to growth in any given year.
Non-Bank Lending Growth
BDC and OSFI data indicate that non-bank lending to Canadian businesses grew by approximately 40% between 2015 and 2023 as chartered banks tightened commercial lending criteria.
ABL Availability Multiple
Asset based lending facilities routinely provide 2-4x the available credit of a traditional bank operating line for asset-intensive businesses in manufacturing and distribution.
SME Bank Decline Rate
According to Statistics Canada, approximately 17% of Canadian SMEs that applied for business financing in recent years were declined by their primary financial institution.
ABL Market Size (U.S.)
The U.S. Secured Finance Association reports over USD $400 billion in outstanding ABL commitments annually — the Canadian market follows similar structural trends on a smaller scale.
Receivables Advance Rate
Canadian ABL lenders typically advance 70-85% against eligible accounts receivable, compared to 50-65% commonly offered under bank operating lines.
Citations
Business Development Bank of Canada. "SME Financing in Canada: Survey Results." BDC, annual. www.bdc.ca
Medium/Prokop/7 Park Avenue Financial."Asset Based Loan Facility: How Canadian Businesses Unlock Hidden Capital". https://medium.com/@stanprokop/asset-based-loan-facility-how-canadian-businesses-unlock-hidden-capital-a6e775de864e
Canadian Federation of Independent Business. "CFIB Business Barometer and Financing Research." CFIB, ongoing. www.cfib-fcei.ca
Statistics Canada. "Survey on Financing and Growth of Small and Medium Enterprises." Statistics Canada, Catalogue no. 61-532-X. www.statcan.gc.ca
Office of the Superintendent of Financial Institutions. "Annual Report: Federally Regulated Financial Institutions." OSFI, annual. www.osfi-bsif.gc.ca
Secured Finance Network (formerly Commercial Finance Association). "Annual Asset-Based Lending and Factoring Survey." SFNet, annual. www.sfnet.com
Innovation, Science and Economic Development Canada. "Key Small Business Statistics." ISED, annual. www.ised-isde.canada.ca
Bank of Canada. "Financial System Review: Credit Conditions for Canadian Businesses." Bank of Canada, semi-annual. www.bankofcanada.ca
Linkedin."Cash Flow Revolution: Why Canadian Business Chooses Asset Based Lending". https://www.linkedin.com/pulse/cash-flow-revolution-why-canadian-business-chooses-asset-stan-prokop-4bc9c/
7 Park Avenue Financial."Asset Based Lending Solutions for Canadian Business Growth" .https://www.7parkavenuefinancial.com/abl-asset-based-financing-business-lending.html?desktop=true
